CLT&G - Help end the sales tax on the internet

Citizens for Limited Taxation & Government
18 Tremont Street Suite 608 * Boston, MA 02108
Phone: (617) 248-0022 * E-Mail: CommActNet@aol.com
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*** CLT&G Update ***
Tuesday, March 11, 1997

Greetings friends;

I just received the following message from Harold Hubschman, an active CLT&G member and also co-chairman of the Free the Pike Coalition. He's requested that it be forwarded to you. I think it's of interest to all of us on the Internet in Massachusetts, so read on with interest.

Chip Ford
Co-director

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Subj: Help end the sales tax on the internet
Date: 97-03-11 14:28:21 EST
From: harold@hubschman.com (Harold Hubschman)
Reply-to: harold@hubschman.com
To: CPR98@aol.com
CC: harold@hubschman.com

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Hello activists,

I am writing to ask for your help on a campaign to pass a law ending the sales tax on internet services in Massachusetts. Our group is backing a bill, sponsored by North Adams Rep. Dan Bosley that would exempt internet services from the tax on telecommunications services. (See the press release below.)

We are looking for people to call or write their state legislators asking them to support this bill.

If you are interested in helping out, please send email to haroldh@massisp.com and I will keep you posted, as the legislative process proceeds, with the names of specific legislators to target with your opinion.

Also, please post and distribute this note as far and wide as you can.

Thanks in advance for your help.
Harold Hubschman
haroldh@massisp.com
Chairman
MassISP

ps - if you’d like to begin right now, you can contact Rep. Bosley and thank him for sponsoring the bill to end taxes on the internet.

You can also contact Rep. Larkin, chair of the House Taxation Committee and Senator Warren Tolman, Chair of the Senate Taxation Committee, asking them to support Rep. Bosley’s bill to end taxes on the internet.

If you support this issue, please call or write these guys. Even a few calls/letters is enough to put the issue firmly on their radar.

They can be contacted as follows:
Rep. Dan Bosley, State House, Boston MA 02133
(617) 722-2120
Rep. Peter Larkin, State House, Boston MA 02133
(617) 722-2430
Senator Warren Tolman, State House, Boston MA 02133
(617) 722-1280
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FOR IMMEDIATE RELEASE

MASSACHUSETTS INTERNET SERVICE PROVIDERS FORM FIRST IN THE NATION COALITION TO END STATE SALES TAX ON INTERNET

Group Labels Sales Tax Major Threat To State’s Online Industry

Brookline, March 10, 1997 -- The leading internet service providers in Massachusetts announced today that they are forming an advocacy organization, the Massachusetts Internet Service Providers Coalition (MassISP), to campaign for an end to the sales tax on online services. This is believed to be the first organized campaign on this issue in the country.

The group is acting in response to ongoing attempts by the Massachusetts Department of Revenue (DOR) to extend the state’s telecommunication tax to internet services. "The telecom tax applies only to basic transmission services, such as telephone and satellite broadcasting," said MassISP chairman Harold Hubschman. "There is no statutory basis for the DOR to extend it to online services."

Despite this, the DOR has ordered internet service providers (ISPs), in Massachusetts and around the country, to begin collecting a sales tax from their Massachusetts customers. But according to Hubschman, internet users already pay the telecom sales tax. "People use the telephone to connect to online services, so they are paying the sales tax—in the form of a tax on their phone bill. For the DOR to require internet users to pay the same tax a second time on their internet bill amounts to double taxation."

The DOR also wants ISPs to pay up to six years of back taxes, a move that "threatens to cripple the online industry in Massachusetts," says Hubschman. "By the DOR’s reckoning, some local ISPs are liable for hundreds of thousands of dollars of back taxes. No ISP has the cash reserves to pay that kind of bill. All that the DOR would accomplish by imposing this retroactive tax would be to stop the growth of the state’s largest ISPs dead in their tracks, and probably drive most others out of state or even out of business."

Explaining that "demand for online services in Massachusetts is so large that the industry is growing at a rate of one to three percent per week," Hubschman outlined a more practical method for the DOR to increase tax revenues from the internet. "ISPs spend every cent that comes in to buy equipment and hire additional staff. In the next five years, ISPs will create between 3000 and 5000 new jobs in Massachusetts. Instead of endangering that growth with a ill-conceived back tax bill, the DOR would collect more money from the internet by taxing it the old fashioned way, namely income and sales taxes on newly created jobs and newly purchased hardware."

MassISP is supporting a bill, filed by State Representative Dan Bosley (D-North Adams), that formally exempts the internet from the telecommunications services tax. "Representative Bosley’s bill simply makes explicit the actual intent of the 1990 law that originally created the telecommunications tax—that is, to tax basic transmission services only," says Hubschman. "Legislators couldn’t have intended for the telecom tax to apply to the internet, since the business of selling online services didn’t even exist in 1990 when they wrote the law."

MassISP is also calling on Governor Weld to declare a moratorium on retroactive taxation of ISPs until the broader issue of taxing the internet is decided by the legislature. "All he has to do is look at the actual language of the 1990 law to see that the DOR doesn’t have the statutory authority to collect an internet tax," says Hubschman.

Since the DOR began its campaign to tax the internet, some Massachusetts ISPs have spent the equivalent of a full time employee’s salary, in legal and accounting fees, to defend themselves. "These are the kind of entrepreneurial, high growth companies that Governor Weld rightly wants to encourage and support," continued Hubschman. "Why is he forcing them to waste thousands of dollars to fight a tax that will in all likelihood be eliminated, when they could be using that money to create jobs?"

Referring to Governor Weld’s recent announcement that repealing the 1990 telecommunications tax is one of his highest legislative priorities for 1997, Hubschman pointed out that "the governor could show both the legislature and the state’s hundreds of thousands of internet users how serious he is about ending the telecom tax by simply telling the DOR to stop trying to extend it to the internet."

Such a public declaration would also send a strong signal to the state’s business community that Massachusetts wants to promote a business friendly internet. "The day after New York Governor Pataki declared that the internet would be tax free in New York, the Economic Development Corporation of New York City began running ads in the Boston Globe inviting Massachusetts companies to purchase internet services from New York ISPs," recalls Hubschman. "Here’s Governor Weld’s chance to send a pro-Massachusetts message in response."

There are over 70 major internet service providers based in Massachusetts, with a total of over 250,000 customers. There are hundreds more ISPs around the country that sell services in Massachusetts. The founding members of MassISP are Bitwise Internet Technologies of South Boston (bitwise.net), Cape Internet of Osterville (capecod.net), Channel 1 Communications of Cambridge (channel1.com), Delphi Internet Services of Cambridge (delphi.com), Galaxy Internet Services of Needham (gis.net), Internet Connection, Inc of Mansfield (ici.net), Shore Net of Lynn (shore.net), The Internet Access Company of Bedford (tiac.net), Ultranet Communications of Marlboro (ultranet.com) and The Xensei Corporation of Quincy (xensei.com).

The coalition is continuing to actively recruit new members. For more information, or to join the coalition, contact Harold Hubschman at haroldh@massisp.com.